CHICAGO — Indianapolis will lease its parking meters for 50 years to a private company under a controversial plan by Mayor Greg Ballard that was narrowly approved Monday by the city-county council.
The council approved the plan by a 15-14 vote. A handful of council members who had been opposed to the deal ended up voting in favor after the Ballard administration announced a number of key revisions, including one that allows the city to opt out of the agreement every 10 years for a fee.
The parking lease is Ballard’s latest effort to raise money for infrastructure improvements without tax increases. He crafted and the council approved a plan over the summer to sell the city’s water and sewer systems to a nonprofit utility in a cash-and-debt transaction. That deal — also approved by a close council vote — netted the city $425 million in cash and the ability to shed $960 million of water debt.
The parking lease deal would hand control of 3,669 city-owned meters for 50 years to Affiliated Computer Services Inc., a Dallas-based parking technology company recently purchased by Xerox. ACS would give the city an up-front payment of $20 million — down from a proposed $35 million before the revisions — and a slice of annual parking revenue going forward.
The agreement gives the city a 30% share of the first $7 million in annual revenue, and 60% after that. Revenue includes funds from parking meters and violations. Ballard, a Republican, said the city would get $620 million over the 50-year life of the lease.
The revised opt-out options would require the city to pay $19.8 million to opt out after the first 10 years, $16.25 million after 20 years, $12 million after 30 years, and $8 million after 40 years.
The revenue-sharing feature distinguishes the deal from Chicago’s precedent-setting $1.15 billion parking meter lease deal last year. Also distinguishing the Indianapolis plan is a law requiring the city to spend the upfront cash and all future revenue on infrastructure improvements within areas where the parking meters are located.
Chicago’s deal has faced a public and political backlash due to significant rate increases, broken meter boxes, and the city’s use of proceeds to balance its budget.
Morgan Stanley was the city’s financial adviser on the deal. Ice Miller LLP crafted the concessionaire’s agreement. The city has no outstanding tax-exempt debt backed by parking meter revenue and therefore will not be retiring any debt. ASC is required to modernize the system and upgrade the meters before it can raise rates.
Proponents of the plan, like Republican council member Robert Lutz, said the city needs new revenue to offset declines tied to property tax caps and falling property values. He also said operations of large assets like the water and sewer systems and parking systems may be better run by non-governmental entities.
“We’re looking at horrible revenue shortfalls and we needed new ways to raise money,” Lutz said.
He added that he only voted in favor of the plan after the terms of agreement were amended to address his chief concerns. Giving the city the ability to opt out and increasing its share of the future revenue helped convince him to vote for the plan, Lutz said.
Opponents, like Democratic council member Jackie Nytes, said the deal’s 50-year term was too long, the opt-out options too restrictive, and that the deal was not the best the city could get. “I expect that Xerox’s stock will go up once people realize the deal’s been done,” Nytes said. “It’s a 50-year gig with the 12th largest city in America, and the terms of the deal are pretty nice for ACS.”
Another source of criticism came from the role of Barnes & Thornburg LLP. The law firm, which often works with the city on various proposals, lobbied for the deal on behalf of ACS. At the same time, city-county president Ryan Vaughn works as an attorney-of-counsel at the firm, and attorney Joe Loftus is one of Ballard’s top advisers.
Nytes said the administration’s lobbying was pushy but not as intense as for the water deal. “The water deal had every law firm in town working on it,” she said.